food prices

Bill Clinton Enters the Food vs. Fuel Debate Regarding Corn Ethanol

by Fran Smith on February 25, 2011 · 5 comments

in Agenda for Congress, Agriculture, Energy, Ethanol

Post image for Bill Clinton Enters the Food vs. Fuel Debate Regarding Corn Ethanol

Another convert to the food vs. fuel debate on corn ethanol — former President Bill Clinton. In his speech on Thursday before the U.S. Department of Agriculture’s annual Agricultural Outlook Forum, Clinton said that farmers shouldn’t be putting so much of their corn crop into ethanol production rather than food. He cautioned that the diversion of the food and feed crop could increase food prices and lead to food riots in developing countries and urged farmers to look to the needs of the poor countries of the world.

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Lowest Corn Reserves in 15 Years — Food Prices to Rise

by Fran Smith on February 11, 2011

in Agenda for Congress, Agriculture, Ethanol

The New York Times noted in an article yesterday that food prices are expected to rise this year as a result of significantly lower supplies of corn reserves — the lowest since 1996 — and a higher use of corn for ethanol. The food vs. fuel tug continues, with the ethanol mandate, the ethanol tax credit, plus massive subsidies causing more and more corn to be diverted to ethanol production rather than food. (See CEI colleague Brian McGraw’s post today.)

The U.S. Department of Agriculture announced February 9 that U.S. corn stocks are projected to be 70 million bushels lower this month, while the use of corn for food, seed, and industrial use will be higher than expected. USDA also said that corn for ethanol use is expected to be 50 million bushels higher — with a record ethanol production for December and January.

With corn prices almost doubling from six months ago, USDA is projecting that those food items most affected by corn used for feedstock will rise in 2011. Thus, pork prices are likely to rise 3.5 to 4.5 percent, beef prices, 2.5 to 3.5 percent, poultry prices, 2 to 3 percent, egg prices, 2.5 to 3.5 percent, and dairy, 4.5 to 5.5 percent.

Check out this and some of the extensive articles CEI has published on the unintended consequences of the ethanol program.

Egyptian Riots Fueled by Ethanol Subsidies and Biofuel Mandates

by Hans Bader on February 4, 2011 · 5 comments

in Agriculture, Energy, Ethanol, International, Trade

As world food prices hit a record high, protests in Egypt demand the removal of the country’s pro-American dictator, Hosni Mubarak. No one can predict with certainty whether his removal after 30 years in power would lead to a constitutional democracy, or a theocratic despotism. The likelihood of an even worse regime replacing Mubarak is real, and has been increased by the widespread diversion of cropland to produce biofuels rather than food. That in turn has led to rising food prices that have fueled unrest among the poor in the teeming slums of Egypt’s capital city of Cairo.

Increased food prices have also led to increasing support for the anti-American Muslim Brotherhood, which has ties to the terrorist group Hamas: it provides relief and welfare services in the slums, increasing its popularity in times of economic distress, and it enjoys greater support among the country’s poor than among Egypt’s smaller and more Western-oriented middle class.

The Telegraph, a leading English newspaper, calls the recent unrest in Egypt and the Middle East “food revolutions.” It points out that “biofuel mandates” have “diverted a third of the US corn crop into ethanol for cars,” reducing food supplies and driving up food prices. “So instead of growing wheat, our farmers are growing corn in order to cash in on ethanol subsidies.”

Egypt is the world’s largest wheat importer, and  imports “more than half of its food supply.” As CNBC notes, “It is food inflation that is” most fueling opposition to the Mubarak regime among the country’s poor. Egyptians have historically spent over 40 percent of their income just on food.

As Slate notes, the “anti-Western” Muslim Brotherhood “remains the only political movement” in Egypt that is “capable of providing nongovernmental charitable services. This gives it a reliable political base in the slums of Cairo and Alexandria.” Rising food prices have cemented that base, and driven previously apathetic slum-dwellers into the streets, shifting the locus of opposition away from the more Westernized middle class.

Obama has been an avid supporter of ethanol subsidies, with close links to the ethanol lobby, unlike Obama’s 2008 opponent, John McCain, who opposed ethanol subsidies. The Obama administration has pushed ethanol mandates, even though they have a history of helping spawn famines and food riots overseas. For example, the costly climate-change legislation backed by the administration contained ethanol subsidies. The administration supports them even though ethanol makes gasoline costlier and dirtier, increases ozone pollution, and increases the death toll from smog and air pollution. Ethanol production also results in deforestation, soil erosion, and water pollution.

Leading environmentalists have lamented the devastating impact of ethanol and biofuel subsidies on the global environment.

Even commentators with close links to the Obama administration have admitted that ethanol subsidies are a terrible idea. Matt Yglesias at the liberal Center for American Progress, which has close ties to the administration, admits that “ethanol subsidies aren’t a good way to clean the environment, but they’re a great way of raising the price of agricultural commodities.” Economists more critical of the Obama administration, such as Larry Kudlow, have been scathingly critical of ethanol subsidies, linking them to the recent unrest in Egypt and “skyrocketing food prices.”

Ethanol mandates also contributed to starvation, food riots, and a growing anti-American uprising in Afghanistan back in 2008.

CBO catches up with CEI on ethanol

by Fran Smith on April 9, 2009 · 1 comment

in Agriculture, Energy, Environment, Global Warming

Well.  The Congressional Budget Office has finally caught up with what CEI has been saying for years –  misguided ethanol policies cause higher food prices without providing significant environmental benefits.  In a report released yesterday, CBO noted this about food prices:

CBO estimates that the increased use of ethanol accounted for about 10 percent to 15 percent of the rise in food prices between April 2007 and April 2008.

And what about ethanol’s highly touted reduction of  greenhouse-gas emissions? Here’s what CBO found:

Last year the use of ethanol reduced gasoline usage in the United States by about 4 percent and greenhouse-gas emissions from the transportation sector by less than 1 percent.

In the long run, if increases in the production of ethanol led to a large amount of forests or grasslands being converted into new cropland, those changes in land use could more than offset any reduction in greenhouse-gas emissions—because forests and grasslands naturally absorb more carbon from the atmosphere than cropland absorbs.

Dennis Avery in a 2006 CEI study pointed this out,  as did this CEI 2007 report on unintended consequences of ethanol policy.  Also see CEI’s website on ethanol.

Alarmism Has Consequences

by Iain Murray on March 2, 2009 · 4 comments

in Energy, Environment, Global Warming, Precaution & Risk, Sanctimony

In a magnificent display of self-delusion, the green movement is holding a demonstration at the Capitol’s power plant today to protest the continued use of coal to keep people warm. Although I’d love to put the continued operation of Congress at the mercy of the weather, there is a more important point here. Coal is Affordable energy increases people’s income, keeps them in jobs, and keeps them alive. Here is a brief summary of some important research on the subject.

    The Human Consequences of Global Warming Alarmism

• Raising energy costs kills. According to a Johns Hopkins study, replacing ¾ of US coal-based energy with higher priced energy would lead to 150,000 extra premature deaths annually in the US alone.
• Reducing emissions hits the poorest hardest. According to the recent report by the Congressional Budget Office, a cap and trade system aimed at reducing emissions by just 15 percent will cost the poorest quintile 3 percent of their annual household income, while benefiting the richest quintile.
• Raising energy costs loses jobs. According to a Penn State study, replacing 2/3 of US coal-based energy with higher priced energy will cost almost 3 million jobs, and perhaps over 4 million.

    More detailed points

• We are already seeing the adverse effects of global warming policies in the ethanol debacle. Ethanol mandates have not just contributed to the spike in the price of gas, but have also increased food prices. Steaks are up 5.5% from a year ago, chickens up 7.7%. These increased costs force the poorest to make hard choices.
• The ethanol mandates also demonstrate that consumer behavior can’t be fine tuned. As fuel and food prices increased, the choices people made showed that they sacrifice food for fuel. A survey by the Food Marketing Institute found that more than 40% of consumers changed their food-buying habits in response to high gas prices. That illustrates that energy is one of the most important purchases they make.
• Coal production is also fundamental to the US economy. The Penn State study found that by 2015, coal production, transportation and consumption will contribute $1 trillion to the US economy and provide 6.8 million jobs and $362 billion in household income.
• That same study shows pronounced regional variations. If coal production was curtailed by 2/3rds, California would be hard hit. It would lose $58 million in economic activity. California households would lose $22 million a year. And 339,000 Californians would lose their jobs.
• But the states of the Central US would be worst hit – Arkansas, Iowa, Kansas, Louisiana, Minnesota, Missouri, Nebraska, Oklahoma and Texas would lose 1.5 million jobs between them.
• Legislators must consider the unintended effects of their actions. If coal production is to be stamped out, the railroad industry in this country would probably collapse along with it. Without rail transport, other bulk commodities would rise in price. And they would increase congestion on the roads, which don’t have enough capacity to deal with freight transport as it is.

    Background: Lives Lost

The Johns Hopkins study (Harvey Brenner, “Health Benefits of Low Cost Energy: An Econometric Case Study,” Environmental Manager, November 2005) found the following:

An econometric model was applied to a hypothetical regulatory case study, whereby U.S. coal was replaced by alternative higher-cost fuels such as natural gas for the purpose of electricity generation. The model was used to estimate the premature mortality associated with increased unemployment and reduced personal income. The adverse impacts on household income and unemployment due to the substitution of higher-cost energy sources were estimated to result in 195,000 additional premature deaths annually

The results from this hypothetical case study may be scaled to apply to specific policy initiatives affecting the U.S. coal-based electricity generation sector. For example, the U.S. Department of Energy’s Energy Information Administration (EIA) estimates that climate change bills currently before the U.S. Congress—such as Senate Amendment No. 2028, rejected by the Senate in 2003 and again in June 2005—could result in the displacement of up to 78% of U.S. coal-based electricity generation with higher-cost energy sources. The methodology employed here suggests that, absent any direct mitigation measures to offset expected decreases in employment and income, implementation of such measures could result in an annual increase of premature mortality rates by more than 150,000.

    Background: Job, Income and Economic Impacts

The Penn State study (Rose, A.Z., and Wei, D., “The Economic Impact of Coal Utilization and Displacement in the Continental United States, 2015,” Pennsylvania State University, July 2006) found the following:

Assigning equal weight to each of the two energy price scenarios, we estimate that U.S. coal-fueled electric generation in 2015 will contribute:

• $1.05 trillion (2005 $) in gross economic output;
• $362 billion in annual household incomes, and
• 6.8 million jobs.

We also estimated the prospective net economic impacts of the “displacement” of coalfueled electricity generation at assumed levels of 66% and 33% from a projected 2015 base.

These levels of displacement are consistent with some of the potential impacts of major environmental policy initiatives in climate change or other areas. In these cases, we again calculated backward linkage and price differential effects to determine potential negative impacts on each state’s economy.

Additionally, we calculated potential positive economic benefits due to the operation of replacement electricity generation of various types. In all states, the net effect of displacing coal-based electricity was negative for the “high-price” scenarios, and in nearly all states, the net effect was negative for the “low-price” scenarios…

Assigning equal weight to the high- and low-price scenarios, we estimate the average impacts of displacing 66% of coal-fueled generation in 2015 at:

• $371 billion (2005 $) reduction in gross economic output;
• $142 billion reduction of annual household incomes; and
• 2.7 million job losses.

Assigning equal weight to the high- and low-price scenarios, we estimate the average impacts of displacing 33% of coal-based generation in 2015 at:

• $166 billion (2005 $) reduction in gross economic output;
• $64 billion reduction of annual household incomes; and
• 1.2 million job losses.

Green Pork

by Jonathan Tolman on January 27, 2009 · 2 comments

in Agriculture, Deregulate to Stimulate, Economy, Environment, Politics as Usual, Stimulus to Nowhere, Zeitgeist

In addition to tens of billions of dollars in the House stimulus bill for infrastructure and other projects to create jobs, there are also funding items that appear to do the exact opposite.  For example, the House stimulus bill contains $175 million dollars for Natural Resource Conservation Service to purchase conservation easements in floodplains.  Funding for the program would effectively be spending tax dollars to pay farmers to stop farming.  Not only would such conservation easements not be creating any jobs, they actually would likely be doing the opposite by taking farmland out of production.

What makes this funding even more egregious is that removing farmland from production tends to increase food prices.  What makes this provision seem even more out of place is the House stimulus bill also includes $200 million in funding for Senior Nutrition Programs, claiming the programs need additional funding due to “rising food costs.”  If Congress was really concerned about rising food costs one would think that they would be less eager to take farmland out of production.